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6Mar/1233

STACK RANKING THE NEXT OWNER OF THE LOS ANGELES DODGERS

Next  owner of DodgersBy Jaboner Jackson 8 a.m. | The auction sale through U.S. Bankruptcy court of the Los Angeles Dodgers to the highest bidder continues in earnest. Bidding syndicates have been whittled down to seven from more than double that amount when the auction process began. Since current Dodgers owner Frank McCourt owns the parking lots surrounding Dodger Stadium under a separate company that is not bankrupt, he has decided to hold onto the parking lots. Accordingly, McCourt's parking lot holdings have pushed real estate developers into the forefront of the bidding process. McCourt will be inclined to pick an ownership group that will align its long-term real estate interests with his.  Last week, footballphds.com detailed the timeline for the sale and introduced the current bidders for the Dodgers. Today, we Stack Rank the Next Owner of the Los Angeles Dodgers.

1. Mark Walter and Magic Johnson | The Walter-Johnson syndicate is the popular choice among Angelenos because of Magic Johnson's success in the local sports and business communities. But popularity does not win auctions. Rather money--both current and future--does. Mark Walter is the money man behind the syndicate. His Guggenheim Partners holds more than $125 billion in assets. Walter will provide the bulk of the financing for the Dodgers transaction.

But financing is only part of the story. McCourt's real goal is to develop the parking lots surrounding Dodger Stadium. Magic Johnson has achieved remarkable real estate success in economically depressed areas through Canyon Johnson Urban Funds, a joint venture between Canyon Capital Realty Advisors and Johnson. Canyon Johnson is currently looking to place $1 billion in investments, which McCourt is eyeing for his parking lots. The Walter/Johnson syndicate offers the most long-term benefit for McCourt because of these real estate issues.

2. Steven Cohen, Steve Greenberg, and Arn Tellem | Money matters most and nepotism matters almost as much. With a net worth of $8.3 billion and significant access to liquidity in his net worth, Steven Cohen brings the most cash money to the table.  Cohen is the founder of SAC Capital Advisors, LLC, a hedge fund sponsor out of New York. But Cohen is only one of the All-Stars in this syndicate. Steve Greenberg has experience working with MLB. He successfully advised on Jim Crane's purchase of the Houston Astros last year. If business is only and always just about the money, Cohen's syndicate has the cash to pull off the victory.

But nepotism matters too, and Blackstone Group, the private equity firm orchestrating the bidding process for the Dodgers, is a large investor in Cohen's hedge funds. Although lacking core competencies in real estate development, the Cohen syndicate brings the most real money to the table.

3. Tom Barrack | Tom Barrack heads Colony Capital, a Santa Monica company that holds $35 billion in real estate investments. Colony has the ability to secure real estate financing over the coming years for developing Chavez Ravine. And McCourt has taken notice. Real estate developers have eyed the Dodgers because of the parking lots in Chavez Ravine that are waiting to be developed. As Angelenos have gone east to the Los Angeles neighborhoods of Los Feliz and Silver Lake over the past two decades and more recently to Echo Park, Highland Park, and Eagle Rock, gentrification and increased property values have followed. Local real estate developers view the area of Chavez Ravine, which is accessible to freeways, including the 5, 2, and 101, as one of the last bastions of Los Angeles development. The play for real estate developers is less about the Dodgers and more about developing the lots surrounding Dodgers Stadium in conjunction with McCourt.

4. Stan Kroenke | Stan Kroenke's bid has garnered significant fan and media interest because he currently owns the St. Louis Rams, an NFL team that has oftentimes been rumored to relocate to Farmers Field in Los Angeles. Despite this attention, Kroenke's bid on the Dodgers has little bearing on any possible relocation plans for the Rams. Even though NFL bylaws prohibit a majority NFL owner from also owning controlling equity positions in other professional sports teams outside of the NFL owner's franchise city, the NFL has not enforced this aspect of the NFL bylaws with any gusto. When Kroenke entered into a purchase agreement to buy 60% of the Rams from Chip Rosenbloom and Lucia Rodriguez in 2010, he already owned the NBA's Denver Nuggets and NHL's Colorado Avalanche. Accordingly, Kroenke did what many successful businesspeople do--he ceded control of the team to his son in a roundabout manner. And the NFL allowed this transaction, even though the transaction hardly satisfied the spirit of the NFL bylaw and certainly did not resemble anything close to a true equity transfer. A true equity transfer would have triggered tens of millions of dollars in tax bills but Kroenke paid nothing.

Accordingly, it is important to consider Kroenke bid's to buy the Dodgers as another attempt to expand his family's sports empire and not just his own. Kroenke certainly has the financial capacity to successfully orchestrate a $1.5 billion bid. And he has the ability to outbid others because of cost synergies across his entire sports empire. Technicalities aside, Kroenke owns controlling interests in the Rams, Nuggets, Avalanche, English Premiere League Arsenal, Pepsi Center (Denver, CO), and Altitude Sports Network. Due to the ability to consolidate costs running the Dodgers and Dodger Stadium with his other sports assets, Kroenke certainly can afford to bid more than the other syndicates, especially with his wife, Wal-Mart heiress Ann Walton Kroenke, backing him up. But because he lacks core competencies in real estate development, McCourt will be less inclined to choose him as the winning bid.

5. Alan Casden | Alan Casden lost a bid to buy the Dodgers in 2003, during which time he put forward a plan to move the Dodgers to downtown Los Angeles. Such plans are decidedly more difficult these days. Nowadays, AEG controls downtown properties and has expressed no interest in building a baseball stadium. Casden is a longshot with a net worth of only $1.2 billion and lackluster relationships with the television networks.

6. Jared Kushner and Family and Aryeh Bourkoff | Jared Kushner is the wildcard in the Stack Rankings. Although Kushner himself lacks the financial capacity to buy the Dodgers, his family has a multi-billion dollar net worth that is focused on east coast real estate.  Furthermore, Aryeh Bourkoff is Vice Chairman of investment bank UBS and has worked with Time Warner Cable extensively on the investment banking side. Such a relationship could bring a formidable financing partner to the table and catapult this syndicate to the top.

7. Stanley Gold and Disney family | Money can only buy so much these days. Stanley Gold heads up Shamrock Holdings, an investment firm founded by the late Roy E. Disney to manage the Disney family's wealth. Although Shamrock invests in real estate, the company does not actively engage in real estate development or construction. They mostly provide financing through a series of real estate investment funds, including the $85 million Genesis L.A. Real Estate Fund and $100 million Shamrock-Hostmark Hotel Fund. Without deep pockets or core real estate development experience, Gold and the Disney family are on the outside looking in.

Joining the Winner

Television networks will look to align themselves with a winning syndicate to guarantee television broadcast rights of the Dodgers when the current TV contract expires after the 2013 MLB season. Time Warner Cable, FOX Sports, MSG, and CBS have all engaged in talks with several of the syndicates to join them in their bids, but at this time it is unclear which network has aligned with whom.

 

References:

Timeline and Bidders for Dodgers (03/2012)

CVC’s Proposal to Rams for Edward Jones Dome (02/2012)

Jaguars Not Coming to LA (11/2011)

 

jaboner@footballphds.com

Comments (33) Trackbacks (0)
  1. The 1 thing that’s most important on the Dodgers is the stadium. Dodger Stadium had renovations a few years back but it’s still a tough place to take a family to. Drunks and obscenities are at every game. Then you have the beating of the Giants fan. TV can’t pay all that money if the stands are empty.

    Now someone will say fans will come if the Dodgers win and that’s true but winning in this league is hard and Dodgers haven’t done it 20 years.

  2. Its all about the parking lots for everyone, Mc Court and the bidders. That’s why the Joe Torre group dropped out. They couldn’t control operations without the parking lot. Mc Court is a snake oil salesman. Whoever does business will him will regret it. Better off working with his wife. At least she’s predictable.

  3. Would have liked to have seen Cuban in on the bidding. He has the money and the charisma that LA needs for an owner. He could have been the next Jerry Bus.

    • cuban was also smart enough to not get in too deep and overpay for a franchise that is in a financial mess with a dipshit disgraced former owner still trying to pull the strings with the parking lots.

      to echo some of the points above, if this really is a real estate play then dodger stadium gets relocated downtown near the convention center (farmer’s field) and chavez gets redeveloped from the ground up.

  4. A big fat meh for living at Chavez Ravine with the gangbangers.

  5. Didn’t Disney own the Ducks and Angels? When they sold those 2 teams, the experiment of big corporations owning these teams ended. Turns out it wasn’t as money making as they thought. So why would Disney’s family want to get back into this biz?

  6. Baseballphds.com?

  7. Stan Kroenke “lacks core competencies in real estate development”? He’s the biggest real estate developer on the list.

    If this is truly a real estate deal, then Kroenke and Tom Barrack are the favorites, not Magic Johnson and Steve Cohen.

    • Yo, Magic built the Magic Johnson 24 Hr Fitness AND Magic Johnson TGIF. How is not not #1 on this list for property deveolopment?

      • Yo, Stan Kroenke has built dozens of shopping centers, plus an unknown number of Walmarts, dating back to the ’80s. Whatever Magic Johnson has built looks like a hobby compared to Kroenke’s list of developments. (Meanwhile, Fortune has called Tom Barrack the “best real estate investor in the world.”)

        If you want to cheer for Magic, that’s your business, but he’s not even in the same discussion with Kroenke and Barrack when it comes to real estate. Not even close.

        • Agreed that Kroenke and Barrack may have more over resources and funds at their disposal than Magic but Magic has a very long standing, and lucrative, business relationship with the City of Los Angeles. There is something to be said for knowing how to get projects pushed through the idiosyncratic bureaucracy of the city. I like Magic to win the bidding war.

          • But what projects would those be? Unless the Dodgers leave Chavez Ravine completely, there are severe limits to what can be done there. Magic also has far less money than Kroenke and Barrack, and he doesn’t have an NFL team to dangle in front of McCourt, as Kroenke does.

            I know Magic has a lot of support in the Dodgers bidding, but the media is allowing popularity and sentimentality to trump basic business realities. Magic is a lightweight compared to Barrack/Hindery, Kroenke, Cohen, et al.

          • True, Magic does not have the financial resources to match Kroenke and Barrack but Magic is part of an investment team. This investment team includes Mark Walker and his $125 billion in assets. That is more than sufficient to “dangle” in front of McCourt. To be frank, McCourt doesn’t really care if the buyer of the Dodgers owns an NFL franchise. That is a moot point. McCourt cares about what he will receive in payment for the Dodgers, the stadium and the surrounding parking lots. Sale price of the team will exceed $2.5 billion.

          • $2.5 billion for the Dodgers plus parking lots seems very optimistic, especially since the stadium needs an estimated $250 to $500 million in renovations.

            As for Magic and his partner, Mark Walter, I just don’t see how they have the muscle, on their own, to come close to getting this deal done, especially if the price exceeds $1 billion.

            Under MLB rules, only a small percentage of the Dodgers’ purchase can be financed with debt. Mark Walter might work for a $125 billion company, but Walter isn’t a billionaire himself and his name isn’t on any of the Forbes “richest” lists. Magic, meanwhile, has a net worth of ~$500 million, but most of it is tied up in other investments. Whoever buys the Dodgers will need to come up with a minimum of $1 billion in cash, and maybe as much as $1.5 billion, and Magic and Walter just don’t have it.

            Now, if Burkle or Soon-Shiong join their group, that would change things, but as of today, the media is substantially overrating the strength of the Magic/Walter/Kasten bid, just as it overrated Caruso/Torre and Gilbert and O’Malley, based only on sentimentality and popularity.

      • One quick addendum: My comments above are based on the media describing the Magic group as the “Magic/Walter/Kasten” group, which implies Mark Walter is investing personally rather than the company he works for, Guggenheim.

        If Guggenheim is actually putting up the big money (i.e., equity rather than debt), then it’s actually the Magic/Guggenheim group, and it might be stronger than it seems. However, if Bill Shaikin is right that Magic was trying to get Patrick Soon-Shiong and/or Ron Burkle to invest as recently as 1-2 weeks ago, that tells me Guggenheim isn’t putting up too much, if any, money.

        • Yeah it’s true: Magic is the nostalgic choice. So was OMalley. Magic definitely can’t afford to buy the Dodgers. And he wants a piece of Farmers Field too? He’s not that rich even after he sold the Lakers part he owns and the Starbucks he owns he’s still more a hoop dream than a real contender. Don’t discount Disney. Guggenheim can’t buy the Dodgers I don’t think because it’s not gonna look good for all their investors. But Disney can: Shamrock is pretty much all Disney money. So they only need to satisfy themselves.

          But overall, it’s going to be Fox or Time Warner who has to step in and make this winning bid happen. The reason why MSG is interested is because McCourt is trying to “bid up” the TV rights.

          • I don’t understand the TV angle as it’s being reported by the media. I know the Dodgers’ next TV rights deal should be worth huge money, but I don’t understand how MSG, Time Warner, etc., can get involved at this stage. For all of 2011, the media reported over and over that Fox has exclusive rights until November 2012, but now the same reporters are talking about TW, MSG, CBS, etc., being involved in the current bidding. Maybe I’m missing something, but I don’t get it. Why would any of the bidders sabotage a potential $3 billion TV deal in 2013 just to get $300 million from CBS or TW or MSG right now? And even if someone was crazy enough to do so, MLB probably wouldn’t approve it anyway.

    • silent stan will buy the dodgers I guarantee it!!!

  8. Kroenke doesn’t have real estate experience or available organization? Comments like this and the simlar one for Shamrock bring into question the whole discussion. I have worked with Shamrock’s real estate finance and analysis team and they are first rate.

    • Agreed Kroenke and Shamrock can definitely develop those parking lots. The #2 choice seems like the odd man out if you follow the real estate development argument. After looking at the list again, it’s all real estate developers and one non real estate team.

      • Shamrock kicked ass in UFC and WWF

        • I remember Shamrock getting his you know what knocked out in UFC.

          But I think all these 7 people have a shot. It’s too early to decide who’ll win (or lose, depending on how you look at it) this auction. The TV networks still need to line up with an auction syndicate. That’ll be the main deciding factor of the max bids.

  9. agreed with @joe. the tv speculation is utter nonsense. fox has exclusive rights until nov 12. the writer of this article even wrote that in the last article he did. people need to pay attention. no reason to buy a piece of the dodgers just to negotiate. it’s 2 separate things. tv money is after the sale. not before the sale.

  10. Is that why Selig voided the contract with Fox?

    • There was litigation then a settlement so Fox’s contract is valid right now. It goes until next year. Main problem with media thinking the TV money is going to buy the Dodgers is that MLB does not want a repeat of Mc Court: highly leveraged debt ownership. Overall, the Dodgers are indicative of what’s wrong with baseball. There needs to be greater revenue sharing and a salary cap to salvage competition. Small teams have way too much of a disadvantage. Not every team can Moneyball their way into contention.

      • Small market teams can still moneyball their way into contention. The problem is that moneyball teams cannot hold onto their stars once their contracts expire. Case in point look at the Brewers. Prince Fielder is a home grown talent but they lost him to the Tigers because of the exorbitant salary he commanded once his small market contract ended.

        There is no reason why the Dodgers cannot be the Yankees of the West Coast. They have almost every competitive advantage over all other MLB franchises with two exceptions. Ownership (which a change is imminent) and TV contract (which will be renegiated in November per @r1). That is why the Dodgers will command a premium price for the next owner. I still contend the purchase price will be closer to $2.5 billion instead of $2.0 billion. It’s all about the projected future cash flows. Nobody will pay top dollar for a negative cash flow.

        • You are forgetting that the FANS pay for all these expensive bids. How do you think the winner will pay back all that money they’re out? Ridiculously high parking prices, concession prices, ticket prices.

          JUST SAY NO TO THE DODGERS.

        • $2 billion, without the lots, is pushing it, and $2.5 billion seems crippling, especially with Dodger Stadium needing $250 to $500 million in renovations.

  11. Who woulda thought u idiots were finally right on something

  12. I guess that whole Stan Kroenke idea of buying Dodgers and moving Rams back to LA is not going to happen.


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